Fintech is set to change the financial industry and it’s been especially focused on changing the traditional forms of banking. The online peer-to-peer lender Zopa has taken another crucial step to disrupting the traditional banking sector by raising £32 million. Zopa is preparing to launch its challenger bank and taking the fight directly to the old guard.
Wadhawan Global Capital and Northzone leading the investment round
The investment came from an Indian financial services firm Wadhawan Global Capital and a venture capital firm Northzone. Northzone has been active in the fintech industry after it closed its £252 million investment fund last autumn. The venture capital firm has previously backed startups such as Spotify and iZettle and it has now turned its attention to London-based startups.
Jeppe Zink, partner at Northzone commented the investment by stating, “We believe Zopa is a blueprint of what modern, technology-first bank will, and should look like, based on transparency and customer service.”
Wadhawan Global Capital’s group chairman Kapil Wadhawan echoed the sentiment in his statement. Wadhawan said, ”The objective of Zopa is in line with WGC’s objective of changing the lives of customers by offering them credit, savings and insurance products.”
So far, the company has raised over £80 million in equity funding. Its latest investment round ended in 2014, with the startup attracting £15 million. Zopa’s previous investors include the likes of Balderton, Benchmark and Augmentum Capital.
Plans to open a challenger bank
The company announced last year it would be applying for a licence from financial regulators in order to launch its own banking services. The investment will help to move this plan forward. Last month, it was given authorisation to act as a peer-to-peer lender under UK’s new Financial Conduct Authority, which will pave the way for the IFSA.
Zopa’s chief Jaidev Jardana said, “This investment gives us additional resources to continue our growth, support the launch of our next generation bank, and bring our award-winning products to even more people in the UK.”
The peer-to-peer lender launched in 2005 and it has since provided over £2 billion in loan value to customers. Its growth in the past few months has been impressive. City A.M. noted how the past 12 months have seen it loan £800 million alone.
Heightened competition amongst UK’s P2P lenders
Zopa was the first of UK’s big 3 peer-to-peer lenders to receive the full license by the financial authorities. It was quickly followed by Funding Circle and all the three startups have been busy in the investment departments. So far, each startup has raised funds this year.
In January, Funding Circle attracted £82 million in investments. Earlier this week, RateSetter announced it had raised £13 million. RateSetter is currently waiting for authorisation from the Financial Conduct Authority for its new product, which would allow customers to hold peer-to-peer loans in an ISA.
When it comes to the UK fintech sector, the competition is definitely heating up. However, the sector is still facing uncertainty over Brexit, with some international startups looking to move elsewhere.